The GENIUS Act Is Only the Starting Point for Stablecoin Regulation
Ryan Peters, assistant professor at Tulane University's business school, believes that the U.S. GENIUS Act is a milestone in stablecoin regulation, but far from the end. The bill addresses the definition of stablecoins and regulatory attribution, mandates cash or short-term Treasury reserves, and ends the jurisdictional dispute between the Federal Reserve and the SEC. However, the bill does not require daily reserve transparency, nor does it address bank deposit outflows. The author calls on Congress to quickly introduce follow-up measures, including daily disclosure of reserve details, establishing outcome-based innovation channels, and setting up liquidity adjustment mechanisms.
Ryan Peters is an assistant professor at Tulane University's Freeman School of Business, based in New Orleans. His research focuses on corporate finance, macroeconomics, venture capital, and investment dynamics.
The GENIUS Act is a watershed moment for the payments industry. For years, regulatory uncertainty stifled innovation, leaving payment service providers operating in a gray area. Now, Congress is finally poised to provide the clear rules we urgently need for stablecoins.
But make no mistake—while the GENIUS Act is a crucial first step, it is far from the finish line. Payment professionals who believe this bill solves all stablecoin challenges are in for a rude awakening.
First, consider the positives of the GENIUS Act. The bill directly tackles the core issues plaguing the industry: What is a stablecoin, and who regulates it? By mandating that every dollar token be backed by cash or U.S. Treasuries with maturities of 90 days or less, the GENIUS Act builds the reliable collateral foundation we need.
Ryan Peters (image used with permission)
The U.S. Treasury Borrowing Advisory Committee projects that by 2028, $2 trillion in stablecoin circulation could absorb approximately $1.5 trillion in short-term Treasuries, about 9% of outstanding supply. For payment providers, this means the tokens we are building will finally have asset backing that matches their promise.
More importantly, the GENIUS Act ends the long-standing jurisdictional battle between the Federal Reserve and the Securities and Exchange Commission, which froze product development for years. By requiring issuers with assets of $10 billion or more to adopt bank-like charters, the bill provides regulatory clarity that enables businesses to actually plan for the future, rather than passively waiting for enforcement actions to define the rules.
Consumer protection is equally significant. Statutory redemption rights and reserves audited by the Public Company Accounting Oversight Board (PCAOB) put stablecoins on par with money market funds in legal status. This benefits not only consumers but also payment providers that need reliable settlement rails.
Here is where payment industry leaders need to be cautious: The GENIUS Act leaves some significant gaps that could create problems down the road. Bank funding stress is real. The Federal Reserve's April 2025 Financial Stability Report warned that token migration could drain the cheapest deposits from regional banks—the very banks many payment providers rely on for banking relationships.
Moreover, we are still flying blind on collateral. Remember the USDC depeg event in March 2023? Traders had no real-time visibility into Circle's exposure to Silicon Valley Bank before things deteriorated. The GENIUS Act does not mandate daily reserve transparency, meaning the next stress event could repeat the same information vacuum that nearly shattered industry confidence.
Congress and regulators need to quickly follow up. Daily reserve transparency should be a non-negotiable baseline. Issuers should be required to publish machine-readable files on the Financial Stability Oversight Council's (FSOC) dashboard, including CUSIP codes, maturities, custodians, encumbrances, and more. Combined with publicly visible token supply, the market could verify liabilities against assets in real time, thereby blocking rumor-driven runs.
We also need an outcome-based innovation pathway, replacing the GENIUS Act's vague Treasury "study" with a dynamic framework that allows novel designs to launch within a regulated structure once they meet quantitative liquidity, loss history, and disclosure thresholds.
Finally, we need to address deposit outflows: Require large issuers to pay an annual fee of 5 basis points of circulating tokens into a Federal Reserve-administered liquidity adjustment mechanism. Term loans from this mechanism could offset the impact on FDIC-insured banks from token-linked deposit outflows, thereby internalizing funding externalities without stifling innovation.
The GENIUS Act will deliver safer, clearer dollar tokens and deeper Treasury-backed liquidity. That is progress worth celebrating. But if payment professionals think they can now set stablecoin strategy while ignoring regulatory risk, they are sorely mistaken.
The GENIUS Act is a necessary first step toward mature stablecoin infrastructure. Whether stablecoins become a resilient payment medium or stumble at the first real stress test depends entirely on how seriously policymakers approach the follow-up. The payments industry has waited too long for regulatory clarity; now we must ensure we get the direction right.